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BSP siphons off P1.62-T excess liquidity to special deposit accounts


The Bangko Sentral ng Pilipinas (BSP) said on Tuesday it succeeded in mopping up P1.62 trillion worth of excess liquidity from this year’s surge in foreign exchange inflows by attracting banks to park the funds in high-yielding special deposit accounts (SDAs). “The Special Deposit Accounts (SDA) facility consists of fixed-term deposits by banks and by trust entities of banks and non-bank financial institutions with the BSP. It was introduced in November 1998 to enable the BSP to expand its toolkit in liquidity management," according to the BSP. These investment instruments are short-term liabilities of the BSP with interest rates higher than the yields of other government securities of comparable tenors. SDA tenors range from as short as three days to as long as two months. “In April 2007, the BSP expanded access to the SDA facility by allowing trust entities to deposit in the SDA facility in order to better manage liquidity in the face of strong foreign exchange inflows," the BSP recalled. Expanded resources The BSP also noted last week that in the first half of 2011 banks expanded their resources by amassing P7 trillion in assets and posting P51.9 billion in net profits. Also indicative of the ample liquidity in the financial system is 17.1 percent growth in banks’ core lending operations to P3 trillion from P2.6 trillion in June year-on-year. Core lending expansion was double the 8.5 percent recorded growth in 2010. Asset quality of banks also improved to 3.6 percent non-performing asset ratio from 4.4 percent, “backed by adequate loan loss provisioning," the central bank said. The BSP also noted that the banks as a whole “enhanced their solvency as capital adequacy ratio remained above regulatory and international standards at 17.4 percent on a consolidated basis and at 16.5 percent on a solo basis as of end-March 2011." — ELR/VS, GMA News

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